Sonali welcome to bloomberg markets. Lets look at the markets quickly. We have a lot of red on the screen. We have the s p 500 now down about one half of 1 . The nasdaq 100 is seeing bigger can kleins. The russell 2000 even more than that. Its now down about 1. 5 on the day, quickening its losses and thats on the back of higher yields. The twoyear yield just flying higher. Its above 4. 67 on the day. Thats a three basis point move. You have to remember how far weve come. We will dive into the Economic Data we had this morning that is driving the yields higher. Michael mckee joins us now to bring us up mike mike to date. This is a nerd indicator. Business inventories are just out at the moment. Its not a really good number. 0. 0 after a 0. 3 increase the month before. That is down from 0. 4 . It suggests the u. S. Is not building inventories as much as people might have thought. There was a feeling that because gdp has shown inventories declining for the last months that we would see factories start to ramp up because of people are buying stuff, they will need stuff to buy. But they are not buying stuff either. You look at what happened with the retail sales report today and it was disappointing to say the least. Its fallen significantly in january and the rebound in february wasnt as great as anticipated, up 0. 6 . The core of the retail sales which is the Retail Control Group that goes into gdp was flat on the month after a 34 5 decline a month before. This tells you the economy slowing down but at the same time, prices are not slowing down. Another interruption to the inflation story is ppi comes in, up 0. 6 on a month thats double what had been anticipated and the super court rate of food, trade and energy is up 0. 4 . Its difficult for the fed to make the case that we are continuing to see the kind of good news they wanted to see before this march meeting. Sonali before the march meeting, it seems like we are getting conflicting data. On one hand, inflation is upside surprising. And some of the data is slowing down. How does that set us up not just for the conversation into next week but the dot plot . Mike there are some fed officials who between meetings have been talking about maybe fewer rate cuts this year. Raphael bostic talked about the possibility there might not be any. It would only take two members of the committee to move their dots up in order for us to move down from three cuts to maybe 2 four fewer. There is the possibility that could happen if they think inflation is not where they wanted to be. Weve only had a month of really bad inflation news so we will see if thats what they do next week. It is now maybe a more live possibility than it was before. Sonali we thank you so much for keeping an eye on the data. Will get more insight into markets and how they are being impacted by the Economic Data. We are joined by the head of u. S. Equity strategy at socgen. When you look at some softening data, particularly among the consumer and you look at retail sales, do you start to worry about some sectors of the market that have been reaching new highs, finally hitting that mark in recent weeks . I think its a very fair question. Currently, the breadth is all in large caps. It started in small caps but the russell is down for the year. I dont think the market is excited about the real economic strength in the u. S. Its more focused on largecap, strong Balance Sheet and is still focused on nasdaq. I think the story for equities especially in the u. S. Is all about the nasdaq. Sonali what about the russell . You seen a lot of data start to mess with the russell when you saw the inflation data and use of the russell 2000 take a hit and its taking a hit again today. But will finally bring love back to the small and midcaps . Do you think they have a risk of being left out of this rally entirely . [no audio] sonali we are frozen with you there for a minute. We want to bring you more of how the market is reacting after the data at the top of the hour as well. We did see a quickening of losses while we try to get our guest back, we saw a quickening of losses in the russell 2000 index. We are having not only higher yields but worse than expected Economic Data when you look at the consumer front in particular. What is more impacted than other areas in an environment like this . We are seeing anything thats not the big tech sector being left out of that love. While we are waiting, lets go to emily to see was moving in markets. What are you taking a look at . Youre talking about the consumer and im looking at Dollar General. They have over 20,000 storefront locations and they been able to turn their business around after consumers are pulling back from purchasing pretty much anything during this period of higher inflation. The comps came in 4. 7 . The samestore Sales Forecast beat and this is compared to their competitor dollar tree. Just yesterday, we saw dollar tree fall about 14 and they plan to close about 1000 stores. Now we have Dollar General saying they plan to slow store openings but they will be opening about 800 stores which sounds rudy good for Dollar General was sounds pretty good for Dollar General. These two can foam consumer focused companies. Sonali what else is moving . For scare is down more than 30 . Wall street journal reported the company has hired advisors to assist with the possible bankruptcy filing. We are still waiting for more information on this but we know that about two weeks ago, bloomberg have reported the electric Vehicle Company was in talks with nissan for a lifeline for potential liquidity challenges. Their most recent Earnings Report was weaker than expected a few weeks ago. They also said they will be slowing their production and they have technical issues. This company was one of the highflying spacs that went public via the special Acquisition Company during the pandemic and the share price has fallen almost 100 since then. Sonali for scare shares now down about 50 , the most ever and at the lowest ever as well. What else are you keeping an eye on . How is the tone shifting among investors . One stock has been moving around all morning. Most metrics on the earnings front actually beat in the stock is down 4 of the earnings were pretty good. The fullyear revenue forecast beat fourthquarter revenue and eps profit. A number of wall street analysts upgraded their price target, jp morgan, evercore and yet the stock is down 5 . Perhaps the First Quarter forecast mr. Revenue. They see revenue at 330 million versus 347. I was looking for the Earnings Report for this Automation Software company that deals with generative ai. I was looking for what was driving the stock lower and analyst notes says the Earnings Report does not speak to that yet so we will have to look more into that. Sonali thank you so much. Coming up, well talk about saudi arabia in talks with top banks on wall street. We will have the details on that deal next. This is bloomberg. Sonali saudi arabia has a record secondary share sale in aramco. The saudis plan to hire jp morgan is one of the main underwriters. Bank of america and Morgan Stanley are also contending in the deal. It could raise as much as 20 billion. Joining us more is matthew in riyadh. Why now and how competitive is it for these banks to get on this deal . As you say, its an intensely competitive process. Back in 2019 when they first did the ipo of aramco which raised around 30 billion which was the biggest ipo deal in history. Its an intensely competitive process before for these banks. Its not something that proved to be particularly remunerative for them. The fees were low but the pressure was on to get on it for credentials purposes rather than because it will raise a huge amount for the investment banks involved in the process. The saudi government is particular keen on trying to do this because as we get further through this plan that the crown prince has to invest in diversifying the economy and invest internationally as well into creating the Sovereign Wealth Fund here, making it one of the worlds biggest, the pressure is on to find sources of being able to fund that. Aramco has traditionally always been the cash cow for the saudi government. That remains so. Is now being used in different ways. The Equity Offering is being done to try to get the cash upfront so it can be used to accelerate investment plans elsewhere around the country and internationally. Sonali this is four years after saudi arabia raised about 30 billion in the ipo. That was the roles largest that was the Worlds Largest stock sale. Part of the team here, the Financial Advisor to pick the underwriters. The Fee Structure, talk to us about the Fee Structure and how this is unique for a deal like this . The investment banks around 2015 had very small presence in saudi arabia. It was a very close market and now its opening up and we are seeing a lot of offerings taking place locally. Big things like aramco is starting to attract more like jp morgan and bank of america. They need to staff up and build their presence here. The challenge has been that should that these deals are done very thin fees in comparison to what you might get if you did a similar size ipo in the u. S. Or europe or even asia. The challenge of doing these deals is trying to find ways to make sure it still ends up being , you still get your payday out of it. The banks are keen to show their relationships with the kingdom and show the relationship with the government in the hope they will make a huge amount of money on these big deals. You can then use it as ways to get other mandates whether this is working for doingm a mandates, these are all institutions that are very closely linked. The governor of the pif is also the chairman of aramco. He is a key client for these banks who they want to please so they can get in on other deals which will end up giving them a bigger payday in the future. Sonali we thank you for all the details. Its a tense moment for the Global Banking industry to get in on that megadeal. Lets get back to the markets but the head of u. S. Equity strategy at soft gin. Nice to have you back. We started talk about the ipo market or the listing market because there is an exuberance that has been underpinning these markets not the least for new stock to hit the tape. How do you feel about the exuberance . Its a fair point. Is it exuberance or optimism . I think theres a fine line between those two. Watching the markets in global m a transactions, they have barely picked up. They are usually one of the first signs that happens during exuberance at the start of ipos moving to mna and being leveraged. Thats a natural progress of the bond market. So far, everything feels like irrational optimism rather than exuberance. Sonali have you feel about where the exuberance or optimism endds . We were talking about where the russell 2000 stands and there is a possibility these stocks get left out of the rally. How do you feel . There is not a huge difference in the largecap. They have the best leverage, the best at profile. Small caps still have massive refinancing. I would say the ideal best scenario would be to say to everyone by small caps in the u. S. They had to be 200 basis points or higher. At the moment, i saw the ppi today, the market is evaluating the optimism excitement that we had back at the end of last year and if that will persist. Nondiscretionary rate cuts are more Rate Adjustments rather than a rate cutting cycle. He needed strongly positive to say small caps will perform in line before large away large caps are doing. Sonali the fact that yields on the twoyear up above 4. 67 and the drift higher weve seen in recent days. Kind of equities are most impacted in that environment that does not necessarily see five rate cuts this year as investors had expected at the end of last year . Usually when these shortterm rates are rising, good growth and good inflation is not a problem. The main thing we are watching as the fixed income volatility. It staying stable or going lower than the bond market will be very boring. It will be a very tight range. If we stay at that backdrop, the only thing we need is the volatility in fixed income not to go up. We expect the ball to come down and to catch up from the movement next to whats there in these different asset classes. Sonali the other area im interested in is semiconductors. If you were excited about the movement upward in the largecap technology stocks, you are much more excited about what you saw in anything driven higher by the nvidia boom. How do you think those equities will continue to fair . I think the tech story in the u. S. , it has more room. My message run with the bulls for nasdaq and semiconductors. What we are watching for is the capex cycle for ai and different semiconductors, that needs to slow down. That only slows down when he Earnings Growth rate start slowing down for all the largecap tech. We are expecting a slowdown in growth but its more backloaded. We will see what the Earnings Growth will be and thats with the market will look for. Its going to buy any weaknesses that happens in nasdaq during the first half. Sonali its like you have to run with the bulls or get run over these days. If you think about areas you are willing to start to sell a little bit, where you look . I think the profittaking elements should be there. We are still conscious of bond proxy parts of the market. The lower end of the trading raised by the u. S. 10 year bond yields and what that means is if we have an idea of bond levels going lower and the cycle, anything with a bond proxy, just avoid it and start selling it. Apart from that, short duration we like. We have a lot of things to like at this point. Sonali when you talk to clients, they think about how to hedge against this rally without getting burned are getting run over by the bulls. How do they protect themselves . In terms of best protection, it has to be anything linked to whats exposed to a lot of leverage. Despite Credit Conditions getting easier, we have seen material outperformance within the credit market of the leveraged part of the credit market. If anyone was to protect, be focused on the credit market and protecting on that side more than protecting on growth, more than protecting if there is a big chinese disinflation that takes place. I dont think that will be a growth part of the equation. Sonali talking is through complicated market ahead of all of the Economic Data in a big fed meeting next week. Still ahead, we will look at Companies Making the most buzz on social media on social climbers up next. This is bloomberg. Okay yall we got ten orders coming in. Big orders starting a business is never easy, but starting it eight months pregnant. Thats a different story. I couldnt slow down. We were starting a business from the ground up. People were showing up left and right. And so did our Business Needs the chase ink card made it easy. When you go for Something Big like this, your kids see that. And they believe they can do the same. Earn unlimited 1. 5 cash back on every purchase with the chase ink business unlimited card. Make more of whats yours. Sonali time for social clitocks making waves on social media this morning. First up is adidas making the social rounds. The german sportswear giant is getting hit by the fallout from its costly breakup with the wrapper formally formerly known as kanye west. It is trying to work through the high inventory of unsold sneakers. X under armour founder is returning as the ceo in april. He replaces the ceo that was in the position for little over a year. Positive operating data for robinhood that includes rising assets under custody and surging trading volume. You can follow the latest company buzz ontre and on your bloomberg terminal. Spacex launched its huge space link aircraft a little while ago. Ed we dont know the status, we lost the camera feed and its about 65 kilometers so below the common line. It was traveling at about 25,000 Kilometers Per Hour which is about 15,000 Miles Per Hour. What was astonishing is as starship reentered earths atmosphere and came below an altitude of 100 Kilometers Per Hour, the signal was maintained for an incredibly long time. It was engulfed by flame for more technically plasma. The reason that spacex was able to maintain such a strong camera connection is because starlink, there is a starlink unit locally on board starship. When coming from a higher altitude and space down to earths atmosphere, the starship is able to maintain constant connection with different starlink satellite which allows spacex to give is that camera feed. The blanket statement, the story here is that spacex has just sent its starship system further and at higher speed than it has ever done before. From a Pure Technology perspective, this will be a huge success. There was a kind of uncontrolled crash of the booster into the gulf of mexico. They were going to simulate a landing up to the point it hit the water but i think they lost control. There will be a postmortem on that in the coming days. Sonali lets talk about the significance of this for elon musk and spacex. Weve been reporting that this is one small step of his broader goal of eventually taking humans to mars. What does today mean . Ed this sounds flippant but its a test of rocket science. There are so many things they had to prove. For example, starships heatshield i hope we can get those pictures for the audience but as it reenters earth atmosphere, it becomes engulfed with what looks like flame, that plasma. Falling at hypersonic speeds, it showed us that the heatshield that spacex designed which is 18,000 hexagonal ceramic tiles worked. Theyve not been able to test this before. What happens if you